01—Abstract
Summary
Summary of the 10-K filed February 19, 2013. Cited figures are marked; the original filing is the authoritative source.
Ventas, Inc. (NYSE: VTR) is a REIT with a diversified portfolio of more than 1,400 seniors housing and healthcare properties across 46 states, the District of Columbia and two Canadian provinces as of December 31, 2012.
The company operates three reportable segments: triple-net leased properties, senior living operations and MOB operations. Segment NOI rose to $1.50 billiona in 2012 from $1.07 billion in 2011, and net income attributable to common stockholders was $362.8 million, or $1.23 diluted per share, compared with $1.58 in 2011. Normalized FFO was $1.12 billion, up from $776.96 million, and the company paid a $2.48 per share annual dividend.
The year was driven by $2.7 billionb of gross investments, including the Cogdell Spencer acquisition (about $760 million including debt), 16 Sunrise-managed communities (about $362 million) and the Lazard-managed Funds, which hold a 34% interest in Atria. Total debt rose to $8.4 billion, and the company issued $2.4 billion of senior notes at a weighted average stated rate of 3.2%. Lease concentration remains significant: Kindred and Brookdale Senior Living are the main triple-net tenants, and Kindred leases expiring April 30, 2013 were largely renewed, re-leased or sold, with the majority of transitions still subject to regulatory approvals.
Key risks flagged in the filing include dependence on Kindred and Brookdale for revenue and NOI, the managerial reliance on Atria and Sunrise, healthcare reimbursement changes under the Affordable Care Act and sequestration, and leverage. Ernst & Young issued an unqualified opinion on the financial statements and on internal control over financial reporting as of December 31, 2012, which excluded Cogdell.
02—Key points
Key Highlights
- Total revenues were $2.49 billion in 2012, up from $1.74 billion in 2011; net income attributable to common stockholders was $362.8 million versus $364.5 million.
- Segment NOI reached $1.50 billion, versus $1.07 billion in 2011, with MOB operations NOI rising to $243.1 million from $116.3 million.
- Normalized FFO was $1.12 billion ($1.12 billion in 2012 versus $776.96 million in 2011); FFO was $1.02 billion.
- The company completed $2.7 billion of gross investments, including Cogdell Spencer (about $760 million), 16 Sunrise-managed communities (about $362 million) and the Funds acquisition.
- Total senior notes payable and other debt was $8.41 billion at year-end 2012, up from $6.43 billion, with $2.4 billion of senior notes issued at a weighted average stated rate of 3.2%.
- The annual dividend was $2.48 per share, and the first-quarter 2013 dividend was declared at $0.67 per share.
- Kindred's April 30, 2013 lease expirations (89 properties) were addressed through renewals, new leases or sale contracts, though transitions remain subject to regulatory approvals.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2012filed February 19, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $2.47B$1.73B | +42.6% |
| Operating Expenses | $2.19B$1.40B | +56.0% |
| Operating Income | $308.81M$362.31M | −14.8% |
| Interest Expense | $288.72M$223.80M | +29.0% |
| Net Income | $362.80M$364.49M | −0.5% |
| EPS (Basic) | $1.24$1.60 | −22.5% |
| EPS (Diluted) | $1.23$1.58 | −22.2% |
| Shares Outstanding (Basic) | 292.06M228.45M | +27.8% |
| Shares Outstanding (Diluted) | 294.49M230.79M | +27.6% |
05—Questions
Frequently Asked Questions
How much of the company's revenue and NOI depends on Kindred and Brookdale Senior Living?
The filing states that Kindred accounted for 10.5% of total revenues and 17.4% of NOI in 2012, and Brookdale Senior Living accounted for 6.4% of total revenues and 10.5% of NOI, excluding discontinued operations. The filing warns that inability or unwillingness by either tenant to meet its obligations could have a Material Adverse Effect on the company.
What happened to the Kindred leases expiring April 30, 2013?
Of the 89 properties whose lease term expires on April 30, 2013, Kindred will remain the tenant on 35 properties with estimated annual base rent of $76.1 million starting May 1, 2013. The company entered new long-term triple-net leases for 49 of the remaining 54 skilled nursing facilities and agreed to sell five. Six transitioned to new tenants on February 1, 2013, and the rest are expected to close in the first half of 2013, subject to regulatory approval.
How did the company's dividend and earnings compare in 2012?
The company paid $2.48 per share in dividends for 2012, an 8% increase over the prior year, and reported diluted earnings per share of $1.23 for net income attributable to common stockholders, compared with $1.58 in 2011. The filing notes that 2011 included $202.3 million of net litigation proceeds from HCP.
What are the main leverage and financing considerations?
Total indebtedness was approximately $8.4 billion including capital lease obligations as of December 31, 2012. Roughly 20% of consolidated debt was variable rate. The company's revolving credit facility had $2.0 billion of aggregate capacity with $1.45 billion available, and the filing states the company was in compliance with its debt covenants at year-end.
06—Continue